Credit Suisse cuts its oil forecast

Oil bears, form an orderly queue. The latest bank to warn clients to brace for persistently droopy prices: Credit Suisse.

The Swiss bank has downgraded its forecast for oil prices, joining a growing list of institutions to do so in the last month . It now expects WTI, the US benchmark, to hover around $37.75 per barrel from the previous $56.44 this year, and $54.25 from $63.31 for 2017. For Brent, the bank expects $36.25 from $58.00 this year, and $54.25 from $65.00 next year.

Right now, Brent is at $30.90 or so, while WTI is at $30.66.

The basis of the revision (highlight ours):

We have become more worried about the outlook for oil demand. Even though global oil demand growth of ~1.7% last year hinged first and foremost on the ongoing recovery in developed economies, if the current panic persists, the demand recovery too may be affected.

The bank adds:

On the supply side, the single biggest source of incremental surprises, remains, we believe, Saudi Arabia. Its capacity flexibility and scale put it apart. With Iran’s return to market all but assured, the big slice of sidelined supply from Libya remains. But its near-term return remains in our view a tail risk only.

On the demand side, near-term worries about macro-risk emanating from China dominate the narrative, and the possibility of a more typical cyclical recession in the US looms further out.